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The Pulse of the Pharmaceutical Industry

Outlook good: A peek into the healthcare agency crystal ball

Written by: | | Dated: Wednesday, June 6th, 2018

Jay Carter

By Jay Carter, executive VP, director of business development at AbelsonTaylor

Just a couple of blocks from the beach in Asbury Park, N.J., less than a mile from the famous Stone Pony, sits a small building called the Temple of Knowledge. In that building and its predecessors, Marie Castello – known to friends, clients, and pretty much everyone as Madam Marie – made a good living predicting the future for the better part of seventy years. I know this – most people of my generation know this – because one of her clients, a young Bruce Springsteen, immortalized her in his song, “4th of July, Asbury Park.”

While I don’t have 70 years of experience or any connections to rock stars, I do share at least one vital characteristic with Madam Marie: It’s my job to predict the future. In fact, anyone in the business of leading a healthcare marketing agency has fortune-telling as a substantial part of their portfolio. And given how quickly change has come in our marketplace, the fortune-telling vertical is growing more important every day; those who don’t succeed at it will likely end up as realtors or undertakers, as two of my former pharma clients did.

So let’s have a peek in the crystal ball ten years into the future. What will agencies look like then? What will the marketplace look like? All predictions guaranteed accurate or your money back.

Total marketing spend will be static, but DTC spend will keep rising.

Twenty years into the direct-to-consumer era, pharma has mostly figured out how to wrest returns out of DTC; it’s not a “let’s try this” maneuver any more. And as the technological tools and sources of data grow more advanced, that understanding will only improve. So don’t plan on closing your DTC department just yet.

That DTC spend might look a little different though.

The sweet spot for pharma today is the 55 to 70 age group. And for all the sound and fury about digital, the least expensive way to get eyeballs in that age group today, by a substantial margin, is still broadcast TV. Yes, it’s old-fashioned and drives the analytics people nuts, but the NBC Nightly News still generates as many impressions in one night with this crowd as even the most popular web properties do in a month. It’s not as exquisitely targeted as digital can be, of course, but the cost difference per impression is just too big to ignore, even for the most devoted digital adherent.

Ten years from now, the sweet spot for pharma will still be that same 55 to 70 age group. But that group of older Americans will look rather different than today’s does, because those folks will be more experienced with digital tools and more likely to be streaming video content rather than flipping on the remote. So DTC spend will have to gradually shift from broadcast into streaming and digital channels – which is great, because then we can do a better job of tying our various digital touchpoints together and learning from how audiences respond to them. And to be prepared, we’d best leaven our DTC departments with talent that is prepared to think in terms of targeted and integrated digital experiences.

So what’s gonna give? HCP spend.

HCPs are the final decision-makers today, and they’ll still be the final decision-makers in 10 years, but their real power of choice is declining; managed care is taking it right out of their hands, most especially in the case of primary care. Hospitals and physician networks are limiting, if not eliminating, access to physicians. And besides, aside from diabetes and osteoarthritis, the unmet needs of the primary care audience have been pretty well met. Don’t think pharma hasn’t noticed, either; if I get a nickel for every sales rep that’ll be laid off in the next 10 years, well, I might not be a rich man, but I’ll have a lot of nickels.

The good news for agencies, though, is that we get paid for content, not number of reps we provide materials for. Whether a brand has a sales team of 10 or 100 or 1,000, they still need smart, interactive content that’s being developed by people who know how to tickle the fancy of busy physicians. And as IDNs limit sales contact, digital engagement with “no-see” HCPs will also grow dramatically. While agencies can expect to make less from HCP work, good HCP people and strong digital will still be a significant part of the agency equation.

The marketplace will no longer reward seven brands in a category.

It just doesn’t make business sense any more, and business sense is the only sense that is going to count to the people making the decisions. Payors are looking to hack and slash cost wherever possible, and one easy way to do it will be to push prescribers towards whomever wins the discounting battle in an overstocked and poorly differentiated category – which is a lot of categories right now. For pharma’s decision-makers this means that if you aren’t going to win a medal, you might as well not bother competing – and in the future, it will mean that if you are going to be fourth to market and don’t have some prominent clinical advantage over one, two, and three or are willing to go lower on price than they are, spend your R&D dollars elsewhere. For agencies it’ll mean fewer brands and an even more decided advantage for the big guys who can outspend their competitors in pitches, because there just won’t be those fifth and sixth and seventh brands to market that smaller agencies use as a way in the door. As much as anything, I see the effects of this trend as the reason why agency business – and pharma in general – is going to contract over the next decade.

Pharma agencies have a play in health and wellness.

Think about it. We’ve got lots of smart, creative people who spend their days (and nights) figuring out the best ways to communicate effectively with patients about their health. Companies in the rapidly growing health and wellness space have to find ways to communicate effectively with their audiences about their health. And no – or at least fewer – FDA regulators lurking behind the curtain! Another plus? Your staff will be thrilled to be able to work without arms tied behind their backs, and a happy workforce is a productive workforce. Besides, pharma agencies can bring expertise to the table in health and wellness that traditional CPG agencies just can’t, and over time all the makers of vitamin beer, DNA tests, and PhoneSoap (look it up) will see that, if they haven’t already. Somebody, maybe several somebodies, in the pharma agency space is going to find a way to make money here. My agency is already in the ring, and several of our competitors are too.

Even more so than it is today, medicine will be a career for altruists.

Know how much the orthopedist is going to net from my knee replacement surgery? $800. Eight hundred bucks to cut out a whole joint, replace it with metal and plastic, reconstruct everything to be sure it works, and keep an eye on me for 90 days to be sure nothing goes wrong. A car mechanic gets more for replacing transmissions, and that’s a much easier job that lots more people have the skills to do. This matters because (a) it’s an (expletive deleted) travesty, but, more importantly, (b) the people going into medicine today, knowing they’ll be making $800 per knee replacement, are going to look at the world and their profession rather differently from those who went into the field 10 and 20 years ago, and that will matter to the agencies trying to communicate effectively with those people.

How best to adjust? Reply hazy. Besides, as Madame Marie could’ve told you, a good fortuneteller never gives everything away.

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